A trust is a legal arrangement that enables a third party, also known as a trustee, to handle a person’s assets on behalf of a specific beneficiary or heir. A person who creates a trust is often legally referred to as a trustor, settler, or grantor.
In PA trusts can be prepared in numerous ways. They can outline exactly how and when specific assets are to be passed on to your heirs when you die, or even before you die. Trusts are very useful estate planning tools as they provide much flexibility and even creativity – with a level of control that a will does not have.
Traditionally, trusts are used to minimize estate taxes. They do, however, also offer other benefits as part of a comprehensive estate plan. Understanding the different types of trusts is key to meeting your estate planning goals – whether they are to avoid probate, give to charity, reduce estate taxes, transfer wealth to your beneficiaries, or protect your estate from creditors and lawsuits.
There are basically two types of trusts: a living trust and a testamentary trust. A living trust or inter vivos trust takes effect while the decedent is still alive. A testamentary trust, on the other hand, may be created according to the terms and conditions stated in the person’s will, but will only take effect upon his or her death.
Living trusts may be classified as either revocable or irrevocable. Revocable trusts enable you to retain control of all your trust’s assets, and leave you free to change or revoke the trust’s terms at any given time. Irrevocable trusts generally transfer your assets out of your estate and potentially out of the reach of probate and estate taxes. Once you establish an irrevocable trust, however, it cannot be amended, altered, or terminated.
There are many types trusts (and wording of trusts) that apply to certain situations such as a living trust, special needs trust, bypass trust, land trust, grantor trust, trust fund, blind trust, revocable trust, irrevocable trust, special needs trust, mental illness trust, schizophrenia trust, testamentary trust, marital trust and more.
It is best to consult with a knowledgeable Pennsylvania trust lawyer to determine the best type of trust for you. Call Nepa & McGraw today at (570) 316-0917 for a free and confidential consultation without obligation.